zenith

[Viking]

FFH has certainly been opportunistic over the past year with their purchases. They continue to get larger and diversify their business, which for an insurer is a very good thing. They also need to grow in the US and it was nice to see them talking about synergies with C&F (I expect C&F underwriting results to be less than stellar in Q4).

 

One red flag I see with this purchase is if they do not have enough cash at the holding company to repurchase their own shares when the next sell off comes (perhaps volatility will decline now that there is no US listing). I would not be surprised to see them raise more $ later this year should the capital markets be willing to give it to them at low cost. My guess is we will find out that Zenith has significant dividend capacity.

 

On a separate note, I have no issue with the dividend that FFH pays because they have communicated quite clearly for many years that they will pay a dividend and its size will be driven by results. They are simply doing what they say they will do and I will not fault them for that.

[Alekbaylee]

Following the completion of the acquisition, Fairfax expects to continue to maintain approximately $1.0 billion in cash and marketable securities at the holding company level

 

This looks good to me.

 

Alek

[Parsad]

Congratulations on the detective work guys!  I'm sure there will be plenty to talk about in Toronto this year.  Cheers!

 

 

[Uccmal]

I think this is a phenomenal investment.  Aside from NB and ORH it is the best ever!

 

The 200 Million is an easy raise using preferred shares and the demand for them is insatiable in Canada from Blue Chip Companies.

[KFRCanuk]

Can I swear?

 

FFH puts sucked my thumb.

ORH buy back sucked my thumb.

Buying zenith (not sucking thumb) priceless!

 

Ok Maybe not priceless but a kewl 25.7%

[Parsad]

Congrats KFR!  Good things come to those that wait.  ;D  Cheers!

[dowfin1]

Nice letter from Stan Zax to employees.

 

http://www.sec.gov/Archives/edgar/data/109261/000110465910007750/a10-4103_1defa14a.htm

[Rabbitisrich]

I think this is a phenomenal investment.  Aside from NB and ORH it is the best ever!

 

The 200 Million is an easy raise using preferred shares and the demand for them is insatiable in Canada from Blue Chip Companies.

 

I would rate this above the ORH and NB purchases. Californian worker's compensation is tricky business and not everyone has the right network of underwriters, sales associates, and fraud investigators to do the job. Plus, Hamblin Watsa will make the investment portfolio more valuable, as opposed to ORH and NB, where the historical investment results were already in the price.

 

I feel great about paying as much as $352 for Fairfax.

[Rabbitisrich]

Knock on wood.

[KFRCanuk]

Congrats KFR!  Good things come to those that wait.   ;D  Cheers!

It was only 5% of all my portfolios... So i wasn't that smrt.

 

[Grenville]

Nice letter from Stan Zax to employees.

 

http://www.sec.gov/Archives/edgar/data/109261/000110465910007750/a10-4103_1defa14a.htm

 

Thanks for posting the letter. Interesting info about expansion into agriculture and the hiring of a new president.

 

"How can this transaction benefit Zenith?

 

Among Fairfax’s existing subsidiaries are many talented and experienced insurance professionals and the systems and infrastructure to support a wide range of insurance products.  In due course, some of you will have the opportunity to collaborate with your new colleagues to leverage these resources as we improve our own product offerings, including expanding our agricultural business to offer lines of insurance other than workers’ compensation."

[djcattlco]

The lawyers are circling on the Zentih deal:

 

 

BOULDER, Colo., Feb 18, 2010 (BUSINESS WIRE) -- The Shuman Law Firm today

announced that it is investigating potential breaches of fiduciary duty and

other violations of state law on behalf of shareholders of Zenith National

Insurance Corp. ("Zenith" or the "Company") (NYSE: ZNT) in connection with their

attempt to sell the Company to Fairfax Financial Holdings Limited ("Fairfax")

(TSX: FFH).

 

Under the terms of the transaction, Zenith shareholders will receive $38.00 in

cash for each Zenith share of common stock they own for a total transaction

value of approximately $1.4 billion.

 

For the quarter ending September 30, 2009, Zenith reported gross profit of

$156.888 million and net income of $19.2 million as compared to gross profit and

net income of $139.177 million and $1.8 million, respectively, for the prior

quarter. Also, at least one analyst has set a price target for Zenith stock at

$40.00 per share. The investigation concerns whether the Zenith Board of

Directors breached their fiduciary duties to Zenith stockholders by failing to

adequately shop the Company before entering into this transaction and whether

Fairfax is underpaying for Zenith shares, thus unlawfully harming Zenith

stockholders.

 

If you are interested in discussing your rights as a Zenith shareholder, or have

information relating to this investigation, please contact Rusty E. Glenn toll

free at 866-974-8626 or email Mr. Glenn at rusty@shumanlawfirm.com.

 

The Shuman Law Firm represents investors throughout the nation, concentrating

its practice in securities class actions and shareholder derivative actions.

 

SOURCE: The Shuman Law Firm

 

 

 

CONTACT:         

The Shuman Law Firm

Rusty E. Glenn, Esq., 866-974-8626

Fax: 303-484-4886

rusty@shumanlawfirm.com

www.shumanlawfirm.com

 

 

 

 

Copyright Business Wire 2010

 

-0-

 

[bookie71]

The sharks attack!!!! >:(

[gaf63]

Paul Rivett comments on the Zenith purchase:

 

The Canadian insurance conglomerate intends to sell workers compensation policies from Woodland Hills, Calif.-based Zenith across its U.S. distribution network, as well as cross-sell general liability insurance to Zenith policyholders, who are primarily in California and Florida. Ê  The insurer gathered a 8.4% stake in Zenith last year. The deal values Zenith at $1.44 billion. Ê  In Toronto, Fairfax stock is up C$3.30 to $371.00 in light trading. Ê  "It's a great marriage for us," says Peter Rivett, Fairfax's chief legal officer. Ê  Unlike many of its peers, Fairfax, run by Prem Watsa, often called Canada's Warren Buffett, is flush with cash. Even with this transaction, the company still has another $1 billion in cash and marketable securities in its coffers, and expects to garner $500 million to $1 billion a year in dividends after privatizing its subsidiaries, says Rivett. Ê  "We now have tremendous internal dividend capacity to support acquistions like this," he says. Ê  This acquisition is atypical for Watsa, who tends to buy insurers that need to be overhauled. That's not the case at Zenith. Fairfax said it is retaining the management team, and the company will continue to operate from its California headquarters. "It's the best insurance company that we've bought," Rivett says. Ê  Watsa has eyed Zenith for awhile. In 1998, Fairfax agreed to buy a 38.4% stake for $28 a share. By 2006, it had divested that stake. But, in the interim, Rivett said Fairfax gained valuable insight into Zenith's business and managerial style. In January, Fairfax disclosed its 8.4% stake. Zenith insiders own about 3.4% of the stock. Ê  Fairfax intends to cross-sell products to policyholders using the distribution platform from its Morristown, New Jersey-based Crum & Forster. Roughly 60% of Zenith's business is in California and 35% is in Florida, with the remainder scattered throughout the U.S., Rivett said. Ê  Fairfax is using a combination of holding company cash and subsidiary dividends to finance the deal. It will also raise $200 million through an equity issue prior to the closing. The transaction is expected to close in the second quarter. Ê  In the past year, Fairfax rebuilt its insurance empire, bringing back into the fold several subsidiaries, including Toronto-based Northbridge Financial Corp., British insurer Advent Capital (Holdings) Plc, and Connecticut-based Odyssey Re Holdings Corp. Ê  The window for acquisitions may be closing, Rivett said. Ê  "We're not seeing the type of investment opportunities that we saw in the first quarter of 2009," he said. "The world is back from the brink and things seem to be functioning again." Ê  -By Caroline Van Hasselt, Dow Jones Newswires;

[Cardboard]

Missed that one...  :'( 

 

I am surprised by the timing. I thought that they would be more patient continuing accummulating shares in the open market to reduce total acquisition cost. Of course, it is more risky since the price can run up on you.

 

Still a good deal. I simply hope that they won't issue $200 million worth of shares. Preferred's are fine, but no equity via shares at these prices. I also don't understand what is so magical about retaining $1 billion at holdco. Why not $800 million following this deal? What is the difference?

 

Cardboard

[Parsad]

The lawyers are circling on the Zentih deal

 

They can stuff it!  They're not getting a penny more on this deal.  Prem is paying up already unlike the Odyssey initial offer.  Cheers!

[Uccmal]

The lawyers are circling on the Zentih deal

 

This seems to be common practice in any takeover these days.  They are fishing for clients.

[ERICOPOLY]

expects to garner $500 million to $1 billion a year in dividends after privatizing its subsidiaries

 

Well it's going to take a big hurricane to knock them out now.

[Christopher1]

It seems that they will issue 200$ of common equity.

 

From page 15 of the 4Q2009 financial information supplement, regarding the Zenith acquisition:

 

"The company intends to finance the acquisition with a combination of holding company cash and

subsidiary dividends, and also intends to raise $200.0 through a common equity issue prior to the closing."

[beerbaron]

It seems that they will issue 200$ of common equity.

 

From page 15 of the 4Q2009 financial information supplement, regarding the Zenith acquisition:

 

"The company intends to finance the acquisition with a combination of holding company cash and

subsidiary dividends, and also intends to raise $200.0 through a common equity issue prior to the closing."

 

Where did you get the supplement, it's not on SEDAR or their web site...

 

BeerBaron

[Rabbitisrich]

It seems that they will issue 200$ of common equity.

 

From page 15 of the 4Q2009 financial information supplement, regarding the Zenith acquisition:

 

"The company intends to finance the acquisition with a combination of holding company cash and

subsidiary dividends, and also intends to raise $200.0 through a common equity issue prior to the closing."

 

Where did you get the supplement, it's not on SEDAR or their web site...

 

BeerBaron

 

It's also on the 6-K: http://www.sec.gov/Archives/edgar/data/915191/000091519110000013/newsrelease-18feb10.htm

 

4th paragraph

 

 

This is still a wise acquisition especially considering that Zenith only places 3% of their portfolio in equities, with the remainder earning less than 3% after-tax. Zenith management fits the FFH culture, and a $1 in this direction will likely go further than a $1 buyback.

 

 

 

[FFHWatcher]

Looks like FFH added 1.2 million shares in Dec (at $30) and just under 1 million in Jan (at $29.70). This is in addition to the 991,000 they held at the end of Q3 (up from 554,000 at end of Q2).

 

Results reported today looked pretty ugly (underwriting loss and falling dividend and interest income). Outlook for future is bleak (business will continue to shrink and underwriting will likely remain over 100 until economy improves which is going to be when???).

 

Shareholder equity = $28.25/share.

 

Shares (ZNT) closed today at $27.90  Let's see what Mr. Market thinks about results on Monday...

 

For those who have not followed FFH for long, FFH owned a significant portion of ZNT a few years back and sold much of that stake for a nice gain when they needed cash. FFH understands this company very well and perhaps this is simply another situation where they are re-establishing postions in stuff they had to sell in the 7 lean years...??? Anyone have an update on HUB???

 

 

You asked about Hub.  I am assuming Hub International?  It was acquired in May/June 2007 for $41.50 by Apax Partners.  http://www.apax.com/en/news/story_1718.html

They are a private equity company.

Hub International was created in about Nov. 1998, IPO'ed in Feb/March 1999.  They were a consolidator of insurance brokers in Canada, mostly Ontario at first.  Hub did a lot of business with Lombard Insurance (Northbridge Subsidiary) and Lombard was involved with some financings of the earlier brokerages.  Fairfax got involved when they started to think bigger and it probably looked better having FFH financing an insurance brokerage consolidator versus Lombard Insurance who would directly compete against Hub's insurance suppliers.  I believe the IPO was done at $13.50 (Cdn $) in Feb. 1999 and purchased at $41.50 (US$) around May 2007.  8 years for a triple plus currency exchange.  I believe FFH had common (probably purchased at $10) plus a convertible debenture which was converted.  I can't remember the price.  Needless to say, a better than average ROR.

[Crip1]

"This acquisition is atypical for Watsa, who tends to buy insurers that need to be overhauled. That's not the case at Zenith. Fairfax said it is retaining the management team, and the company will continue to operate from its California headquarters."

 

Lessons learned...

 

-Crip

[ECCO]

Fairfax Financial Holdings Limited (TSX:FFH - News)(TSX:FFH.U - News) has agreed to issue 563,381 subordinate voting shares to a number of institutional investors at a price of $355 per share for aggregate proceeds of approximately $200 million. Fairfax previously announced its intention to complete the equity offering in connection with its proposed acquisition of Zenith National Insurance Corp. Fairfax intends to finance the acquisition with a combination of holding company cash and subsidiary dividends, and will use the proceeds of this offering to increase its cash position at the holding company. The acquisition is subject to a number of customary conditions, including regulatory approval and approval by Zenith National's stockholders, and is expected to close in the second quarter of 2010. Closing of this share issuance is subject to approval of the Toronto Stock Exchange and is expected to occur on or about February 26, 2010.

 

Fairfax intends to file a prospectus supplement to its short form base shelf prospectus dated September 25, 2009, in respect of this offering with the applicable Canadian securities regulatory authorities. Details of this offering will be set out in the prospectus supplement, which will be available on the SEDAR website for the Company at www.sedar.com.

[NormR]

The lawyers are circling on the Zentih deal

 

They can stuff it!  They're not getting a penny more on this deal.  Prem is paying up already unlike the Odyssey initial offer.  Cheers!

 

I had a grand time clicking on lawyer ads served up by google here.  I love making the jackals pay for a good forum.  ;D ;D ;D